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Thursday, August 7, 2008

Things are dark at the Sun-Times; how far off is dawn?

Posted By on 08.07.08 at 06:08 PM

The bad news: On Thursday the Sun-Times Media Group announced an operating loss of $24 million for the second quarter of 2008, ended June 30. The good news: Last year's loss for the same quarter was $80 million.

The bad news: "It's no secret that the newspaper industry is in rough shape," the Media Group told shareholders. "Our industry's advertising revenues are being depressed by the significant declines in the industries that are most important to us -- housing, real estate, employment, autos and, increasingly, retail. Some of the issues affecting our advertising revenue are economic, while others are secular. The entire newspaper industry is in a deep recession, possibly the deepest in 70 years. And it may well worsen."

The good news: "As you will recall, on December 14, 2007, we announced our goal of reducing operating costs by $50 million a year. We expect to meet that goal in 2008."

The bad news: "However, double-digit declines in advertising revenue -- 13 percent in the first quarter and 14 percent in the second quarter -- coupled with rising newsprint and energy costs, wiped away the benefits of those cost reductions. With no end in sight to the industry malaise, newspaper companies including yours find themselves looking for additional ways to manage costs and ultimately survive."

So there will be more cuts. (The managerial ranks of the Media Group's Pioneer Press were cut back just this week.) But if there is no good news for shareholders, they expect feisty news, and the Media Group did not disappoint: "We are transforming ourselves from a print company with an online presence to a fully integrated, 24/7 news operation that gives our readers and advertisers the products and service levels they demand. Despite the falling market, we believe we continue to have important new business opportunities."

To find out more about what they are, read the full report to shareholders from CEO Cyrus Freidheim Jr. (One idea's to take the company private, which would mean no more shareholders to report to)." In short," said Freidheim, "the Sun-Times News Group will do everything in its power to emerge as a market leader in this tumultuous but extraordinary industry."

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